Until the renaissance in hedge funds over the last decade, private equity firms were truly the
Masters of the Universe of Tom Wolfe fame. Since then, however, private equity has had to compete with high-paying hedge funds for talent. Thankfully, the two industries are in, for the most part, different businesses, so the competition has been more for up-and-coming talent than the experienced people private equity firms tend to prefer.
And experience is key here. An MBA graduate with decent marks from a good school can reasonably expect to find an associate's position waiting for him or her at a big Wall Street firm of some kind. Yet at most private equity shops, that person would be told to come back with 20 years of increasingly important and productive experience.
"Given a choice between hiring an experienced investor for our firm and landing a guy who's run a leveraged buyout, I'd take the latter," The Carlyle Group's co-founder, David Rubenstein, told Fortune in 2007.
That's not to say you can't land a position at a private equity firm as a newly minted MBA, or even fresh from undergraduate school. But it's rare, and only a handful of private equity firms have a few openings for candidates at this level of experience. But don't despair. The sheer diversity of operations within a typical private equity firm provides a number of opportunities for you. And if you don't get in the door right out of college, you can position yourself for a private equity career while working elsewhere.
Here's a look, broadly speaking, at what private equity firms seek in new hires:
Education
To MBA or not to MBA?
Again, with only a handful of exceptions, such as The Blackstone Group's analyst program for undergraduates, an MBA is about as close to a prerequisite for most private equity positions as you can get. And unless you're coming on board with top-notch experience at a big-name Wall Street firm, that MBA needs to be from a high-ranked school. Higher degrees, however, are seen as a luxury, so you won't find too many doctorates among private equity employees. But in addition to the MBA, you'll be expected to keep up with the latest news in the field as well as some of the academic work being produced that has an impact on private equity activity.
It should be worth noting that, for many young professionals involved in trading, obtaining an MBA has been seen as a waste of time. A recent headline in The New York Times trumpeted "Bye, Bye B-School." And for those in hedge funds and other heavy-trading environments, this can certainly be true. Math and engineering backgrounds have become far more valued than traditional MBAs by some hedge funds and investment banks.
Yet among the deal makers, there's a lot more to identifying, acquiring, streamlining and exiting a strong investment. The MBA remains an important part of the makeup of a private equity employee. Yes, in some instances, your undergraduate work and some extensive deal making and/or operational experience will help you get a job with a private equity firm. Certainly, some of the smaller and more aggressive firms are willing to overlook a master's-level degree.
Most aren't, however. So if you want to work in private equity and have yet to gain your MBA, you will have to make a very compelling case based on your experience...or start taking classes.
Experience
When you're managing funds worth $5 billion and can "lever up" as much as six times that amount, you can afford the best. And no matter what the role, private equity firms want experienced minds, even at levels that other Wall Street firms might call "entry level." For typical associate-level positions, you'll need an MBA and anywhere from two to five years of experience at a top-notch employer working directly in your specialty, whether it's deal making, research, corporate operations, accounting, etc.
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